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Money, Tobin Effect, and Incerasing Returns

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  • Basci, Erdem
  • Erdogan, Ayse M.
  • Saglam, Ismail

Abstract

This paper shows that unregulated decentralized equilibrium is viable under increasing returns technologies in an overlapping generations model of production with cash-in-advance constraints. We also demonstrate that the model exhibits both the Tobin effect and the reverse Tobin effect.

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File URL: http://mpra.ub.uni-muenchen.de/1917/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1904.

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Date of creation: Sep 2006
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Handle: RePEc:pra:mprapa:1904

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Keywords: Increasing returns; cash-in-advance constraints; overlapping generations; Phillips curve;

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  1. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Modeling Money," NBER Working Papers 6371, National Bureau of Economic Research, Inc.
  2. Brown, Donald J & Heal, Geoffrey M, 1983. "Marginal vs. Average Cost Pricing in the Presence of a Public Monopoly," American Economic Review, American Economic Association, American Economic Association, vol. 73(2), pages 189-93, May.
  3. Ghossoub, Edgar A & Reed, Robert R, 2005. "Money and Specialization in a Neoclassical Growth Model," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 37(5), pages 969-75, October.
  4. Erdogan, Ayse M. & Saglam, Ismail, 2006. "Monetary policy determines the long-run Phillips curve: An OLG model of production with cash-in-advance constraints," Economic Modelling, Elsevier, Elsevier, vol. 23(2), pages 308-315, March.
  5. Erdem Başçí & Ismail Saglam, 2005. "Optimal money growth in a limited participation model with heterogeneous agents," Review of Economic Design, Springer, Springer, vol. 9(2), pages 91-108, 04.
  6. Cooley, Thomas F & Hansen, Gary D, 1989. "The Inflation Tax in a Real Business Cycle Model," American Economic Review, American Economic Association, American Economic Association, vol. 79(4), pages 733-48, September.
  7. Robert E. Lucas Jr. & Nancy L. Stokey, 1984. "Money and Interest in Cash-In-Advance Economy," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 628, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 18(2), pages 203-20, April.
  9. CRETTEZ, Bertrand & MICHEL, Philippe & WIGNIOLLE, Bertrand, 1998. "Cash-in-advance constraints in the diamond overlapping generations model: neutrality and optimality of monetary policies," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1998005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1997. "Sticky price and limited participation models of money: A comparison," European Economic Review, Elsevier, Elsevier, vol. 41(6), pages 1201-1249, June.
  11. Charles T. Carlstrom & Timothy S. Fuerst, 1995. "Interest rate rules vs. money growth rules: a welfare comparison in a cash-in-advance economy," Working Paper 9504, Federal Reserve Bank of Cleveland.
  12. Khan, M Ali & Vohra, Rajiv, 1987. "An Extension of the Second Welfare Theorem to Economies with Nonconvexities and Public Goods," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(2), pages 223-41, May.
  13. Vohra, Rajiv, 1988. "On the existence of equilibria in economies with increasing returns," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 179-192, April.
  14. Fuerst, Timothy S., 1992. "Liquidity, loanable funds, and real activity," Journal of Monetary Economics, Elsevier, Elsevier, vol. 29(1), pages 3-24, February.
  15. Guesnerie, Roger, 1975. "Pareto Optimality in Non-Convex Economies," Econometrica, Econometric Society, Econometric Society, vol. 43(1), pages 1-29, January.
  16. Erdem Basci & Ismail Saðlam, 2001. "Bertrand-Edgeworth Equilibrium in a Cash-Advance Economy," Departmental Working Papers, Bilkent University, Department of Economics 0104, Bilkent University, Department of Economics.
  17. Beato, Paulina, 1982. "The Existence of Marginal Cost Pricing Equilibria with Increasing Returns," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(4), pages 669-88, November.
  18. Lucas, Robert E., 1984. "Money in a theory of finance," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 21(1), pages 9-46, January.
  19. Erdem Basai & Ismail Saglam, 2003. "Bertrand-Edgeworth equilibrium in a cash-in-advance economy," Oxford Economic Papers, Oxford University Press, vol. 55(4), pages 679-695, October.
  20. Drazen, Allan, 1981. "Inflation and capital accumulation under a finite horizon," Journal of Monetary Economics, Elsevier, Elsevier, vol. 8(2), pages 247-260.
  21. Vohra, Rajiv, 1992. "Marginal Cost Pricing under Bounded Marginal Returns," Econometrica, Econometric Society, Econometric Society, vol. 60(4), pages 859-76, July.
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